By Wellington Makonese
RESERVE Bank of Zimbabwe Governor, Dr John Mangudya says the country cannot afford to fully dollarise as the move will be detrimental to the socio-economic growth of the country.
The Russia Ukraine geo-political impasse has had far reaching implications on the global economy, and Zimbabwe has not been spared from external inflationary pressures.
While some quarters have been clamouring for full dollarisation of the economy, the Reserve Bank of Zimbabwe has clarified that 60 percent of the inflationary pressures are imported, hence dollarisation is a recipe for economic stagnation.
“The government has allowed for the use of foreign exchange alongside the local currency. The greatest challenge with full dollarisation is that we can’t have enough capacity to monetise all the bank balances for foreign exchange.
“The greatest danger the economy would face is to be forced to mix virtual currency and foreign exchange and banks would need to separate the two currencies and trading would continue between the foreign exchange balances and the virtual forex balances. We need to love this country and not destroy the momentum and tame.
“We have been there before in 2018. We will have parallel market of virtual money,” said Dr Mangudya.
He added that behavioural issues have also contributed to macro-economic instability.
“What we have are arbitrage businesses who are behaving in such manner where they get the Zimbabwe dollar and get the USD, but when the rate goes up it’s the consumer who is bearing the brunt.
“We have over US$2 billion to back our local currency, that means we can be stable. However, we see inflation continuing, which points to behavioural issues. We sympathise with the people for they have memories of 2009, but we cannot sacrifice growth for temporary stability.”
Last month, government put in place a raft of measures including a brief suspension of institutions involved in speculative lending tendencies, which according to the central government are still under probe.